Moore County investor defrauded $6 million from clients, feds say

The federal government accuses a Moore County investment fund owner of stealing millions of dollars from 176 clients and using the money to build a $2 million home for himself.

James Alexander Shepherd, 58, got caught in March because the investment industry has shifted to electronic verification of records instead of paper verification, according to authorities.

Shepherd, who lives in Vass, has agreed to plead guilty to one count of securities fraud, U.S. Attorney Anne M. Tompkins announced Monday in Charlotte. A bill of criminal information was filed against Shepherd on Monday in U.S. District Court.

The U.S. Commodities Futures Trading Commission is also suing Shepherd, saying he misappropriated at least $4.45 million of his clients’ money through his company, James A. Shepherd Inc. of Southern Pines.

Tompkins’ office says Shepherd promised to invest clients’ money in funds he owned and controlled, but he instead used the money for other things. Authorities say he paid some of it to investors in an unrelated hedge fund, that he used some for personal trading accounts and that some went to underwrite an investment newsletter that offered news and advice to thousands of subscribers.

Shepherd also spent on himself, including construction of a $2 million residence in Vass and payments on the mortgage.

Investigators say Shepherd sent false financial statements to his clients. He used trickery to conceal the fraud from the auditing efforts of an independent accountant. He allegedly set up a false address for a bank, created a fictitious identity as a bank employee and used that address and identity to send false records to the accountant.

The fraud was uncovered in March when Shepherd refused the accountant’s demand that he switch to a new online system that has become an auditing standard.

Investigators found that in December, Shepherd issued a statement to investors that one of his funds had $6 million when it really had less than $100,000, authorities said.

“For seven years, Shepherd used his investment fund as his personal piggy bank and repeatedly lied to his investors who trusted him with their savings,” Tompkins said in a statement. “This is not the case of a single bad investment. Shepherd used his investors’ money to fund his failing investment funds and his personal lifestyle and prolonged the fraudulent scheme through trickery and lies.”

The criminal bill of information says Shepherd must forfeit property involved in the offenses and all property that is proceeds of such offenses.

In its civil lawsuit against Shepherd, the trading commission asks the court to order Shepherd to pay restitution and give up any ill-gotten gains, to ban him from trading and to issue an injunction against further violating commodities trading laws.

Shepherd’s initial appearance and plea hearing in criminal court have not been set. At sentencing, Shepherd faces a maximum of 20 years in prison and a $5 million fine.

In the plea, Shepherd agreed to pay full restitution to his victims, the amount of which will be determined by the court at sentencing.